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What Is Product-Market Fit And Why Do I Need It
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What Is Product-Market Fit And Why Do I Need It

What Is Product-Market Fit And Why Do I Need It

Building Great Products
July 8, 2021
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17 Jogs
Why it matters?

Product-market fit is an important concept to understand if you want to be successful and grow your business. It's the idea that you've found a product that addresses the needs of the market. Achieving this can be difficult because it requires a lot of research and understanding what people want or need. Marc Andreessen put it best, "It's the only thing that matters".

What is product-market fit?

The definition of product-market fit is hard to pin down, but Marc Andreessen describes it as follows, "It's when you have a minimum viable product that early adopters love and they can't stop talking about it".

Your business may have the best products in the world, but without product-market fit, it's not going to go far. It's not something that can be easily defined, but it's the combination of having a product that people love and addresses an unfulfilled need in the market. There are some important factors that come into play like:
- Understanding what type of people or companies you want your product for
- Identifying when it works best and who would benefit most from using your product
- Knowing how to communicate this so they can keep coming back for more

It's a lot of work to figure out those needs and build a product that will hit the mark. Sometimes it can even take several attempts before you get it right, but once you do, everything else becomes easier.

From Superhuman's Rahul Vohra to a16z's Marc Andreessen, here are some the greatest pieces of content available on what product-market fit feels like and how to find it.

The Content

Each link contains a summary produced by one of Joggo's geniuses so you can decide where to spend your time learning more

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Andrew Chen
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Andrew Chen

Zero to Product/Market Fit – it’s really hard

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The Summary

What to do to achieve product/market fit

  • Traction is everything
  • Once you get to product/market fit, you can shift your focus to distribution and growth and win the market

What to do if you don’t have product/market fit

  • Find a point between new and pre-existing product categories 
    • New Product = a lot more risk 
    • Pre-existing product = less risk but more competition, expectations etc. 
  • The easiest short-term path is to clone something that already has product/market fit
  • Build something that consumers fundamentally understand, but with a clear innovation that you can market around.

Common mistakes people make

  • Too much “minimum” in MVP (Minimum Viable Product)
  • Technology in search of a problem
  • Building things that sound cool internally but no one else cares about
  • Bad market and product decisions

How to scale

  • Deploy VC money and hire operators who have scaled before
  • Paid ads, viral loops, SEO
March 11, 2013
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Andrew Chen
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Andrew Chen

Minimize your Time to Product/Market Fit

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The Summary

Time to Product/Market Fit (TTPMF)

  • This must be minimized.
  • If a startup fails to achieve product/market fit, it will fail.
  • 1-2 years is generally the limit before a startup runs out of capital or its team falls apart.

Reducing The TTPMF

One way is to copy existing products that have already achieved P/M fit. However, cloning a product 100% carries weaknesses such as: - Inability to grow the market - Subjected to incumbent competitors' control of market - Cannot compete with network effect of existing products Therefore, startups should preserve 80% of the product’s characteristics and reinvent 20%, creating enough product differentiation to grow past the incumbent competitors. Reduce TTPMF to focus on marketing optimizations without sacrificing long-term strategic value.

June 25, 2007
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Marc Andreessen
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Marc Andreessen

The only thing that matters

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The Summary

There is a wide divergence of success and of caliber/quality for the 3 core elements: team, product, and market.

Definitions of key terms:

  • Caliber of team: suitability of CEO, senior staff, engineers, & key staff
  • Quality of product: impressiveness of product to customer
  • Size of market: number & growth rate of customers for product

Market matters most to success because:

  • Market will be fulfilled by first viable product
  • It doesn’t matter how good the product is, so long as it works
  • Team is easy to upgrade if market is good
  • A great team & great product cannot fix a bad market

The only thing that matters is getting to product/market fit (PMF). Before PMF (BPMF), do whatever you can to get to PMF.

May 28, 2011
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Andrew Chen
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Andrew Chen

When has a consumer startup hit product/market fit?

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The Summary

Summary

  • There is no easy test to prove product-market fit but you will feel it when it is happening
  • If you can confirm pre-existing demand in a market and design against the needs of the market you will have better product design

Validating Product-Market Fit in Consumer Internet

  • A market consists of all the consumers who can search for and compare products for a use case they already have in mind
  • Determine pre-existing demand using Google Keyword Tool to determine how many people are searching keywords that lead to your site
  • If the people searching is in the millions you have a large market
  • A great market has a large number of potential users, high growth and ease of user acquisition
  • Do not worry about competition or monetization as you can move those levers - you can't make a market
  • You can design your product for the market on the most important attributes to differentiate your product

January 28, 2020
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Lenny Rachitsky
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Lenny's Newsletter

How to know if you've got product-market fit

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The Summary

Product-market fit (PMF): The definitions of PMF are broken into pre-product and post-product: - Pre-product, look for:  - Visible excitement - People who are eager to spend money for it now are a better signal of interest and PMF - Post-product, look for:  - Retention: If the product-market fit flattens off at some point, it means that there is product/market fit for some market or audience.  - Surveys: You have PMF if over 40% of your users would be very disappointed if your product went away. - Exponential organic growth: If major brands get in contact with you organically and your users spontaneously market your app to other people, you are close to PMF. - Cost-efficient growth:  - Burn Multiple = Net Burn / Net New ARR - “The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is.” - A sales yield of greater than 1.0 also indicates PMF. - CAC < LTV - Acquisition cost of a customer is less than the lifetime value of one.  - Sustainable acquisition is a better signal of interest and PMF. - Customers are excited for your product: Customers are willing to pay for your product just as fast as you launch it. - People are using your product even if it is not working properly sometimes. - If a company gets larger despite poor execution and management, it is a great measure of product/market fit.  PMF isn’t a one-time, discrete point in time. The factors that determine PMF are subject to change because of the volatility of competitors and market segments.

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GrowthMinds

How to master customer interviews and find product/market fit

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The Summary

It's a Product/market fit problem

Growth problems are not to do with people knowing you or your company. 1. Identify your categories of potential customers before interviewing. 2. Engage with online groups before asking for interviews. 3. Explain your objectives in your initial email. 4. Do Customer Interviews

Customer Interviews

  • Ask the right questions. Create and iterate on question-asking.
  • Distinguish if you should ask customer development questions or existing clientele
  • Explore question types: Problem/Product Discovery questions, Problem/Product Validation questions, and Product Optimization questions, Reflective questions.
  • Leverage silence.
December 7, 2009
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Andrew Chen
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Andrew Chen

Minimum Desirable Product

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The Summary

In product development, a product is built only to the point in which it can be tested.

Two types of tests include the following:

Minimum Viable Product

  • Building a product that solves the core problems of customers to allow for feedback to guide product development
  • Usually centered around business perspective, which varies across different companies
  • E.g. Profitable social network with poor user churn rate

Minimum Desirable Product

  • Focusing on outputting a high-value product experience for customers
  • E.g. Magic box that spits out money whenever a button is pressed

In the short run, desirability trumps viabilities as startups seek to achieve product/market fit.

There are some markets, like pharmaceutical drugs, where the engineering aspect is prioritized, leading to Minimum Feasible Product.

June 20, 2012
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Andrew Chen
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Andrew Chen

When does high growth not imply product/market fit?

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The Summary

Growth does not equate to achieving product/market fit

Products can be separated into two components: - Distribution tactics - The viral loop that draws in new users - Product experience - The product’s usage patterns In some cases, a product has a viral loop that is not compatible with its product experience. After completing the viral loop, the product’s value diminishes, leading to low retention rates.

Some questions can be asked regarding a product’s growth

  • What are activity levels like as time progresses?
  • Does the viral loop communicate the value of the deeper product?
  • What is the user bounce rate after the first viral flow?
June 2, 2020
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Lenny Rachitsky
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Lenny's Newsletter

Interviewing users for product-market fit

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The Summary

Find product-market fit by collecting data and falsifying your product's underlying assumptions.

  • If you can easily reach 100+ active users, consider a survey.
  • Measure user affection for your product, then measure relative utility.
  • If you can't easily reach 100+ active users, talk to 6-12 of them.
  • Be especially attuned to recognition of mention of superior value relative to competitors or alternatives.
  • Do not ask: NPS or "How likely are you to recommend this product to a friend?"
  • Do not ask: "What do you want?" and blindly build it.

Collect data and try to falsify your product's underlying assumptions

Are people experiencing the problem your product sets out to solve in the first place?

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Gigi Levy-Weiss
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NfX

10 Places to Find Product-Market Fit

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The Summary

Engagement and retention numbers reveal an early stage startup’s product-market fit (PMF), which is a critical determiner of sustainable growth. Once PMF is achieved, a startup can focus on fast growth instead of just survival. Here are ten specific places for founders to look for PMF. 1. Taking an existing activity and making it 10X easier: From a market standpoint you are already de-risked here. 2. Making an existing activity 10X better (& networked): Create defensibility through network effects. 3. Creating a new inventory to be sold in a marketplace: Unlock latent supply, as inventory can be created where assets are being under-utilized i.e. cars with Uber. 4. Discover new willingness to pay: Get people to pay for something they’d classify as “free”. 5. Connect a group of people that were not visibly connected before: Understand the emotional drivers of the target audience to differentiate from other social networks.   6. Give people a new or easier way to make money: Examples include Uber and Fiverr.  7. Turn something digital that isn’t digital: There are still a lot of manual processes in the B2B space. 8. Find a way to offer 0 pricing: Give users a product they’d rather want for zero price.  9. Create a young version of a proven product: Tweak a pre-existing product but for younger generations with different needs. 10. Find a new ‘pleasure center’ in the mind: Make your product fun and addicting.  When a user cannot live without a product because of the value it provides them, then there is good PMF.

August 17, 2015
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Sachin Rekhi
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Sachin Rekhi

How to Design Your Customer Validation to Maximize Product/Market Fit

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The Summary

Customer Validation Process

  1. Find 20+ potential customers that fit the target audience.
  2. Prepare an interview guide/presentation.
  3. Conduct 1:1 interviews with the customers.
    1. Record the interviews if possible.
  4. Take copious notes of the dialogue and summarize findings.

What should be included in the interview guide/presentation?

An Overview

A high-level single-sentence description of what your product or service is trying to accomplish.

Problem You Are Solving

  1. Discover the pain points that the customer is facing.
  2. Ask the customer to rank the various pain points.

Value Propositions

  • Provide the value propositions with limited context.
    • Gives you a sense of whether your value propositions are clear enough that the customer understands without context.

The Solution

  1. The fidelity of the solution isn't as important.
    1. It's far more important to get customer feedback early and often.
  2. Present the solution and note the customer's reaction and feedback.

Competition

Discuss alternatives to your solution.

Target Audience

Verify the target audience by asking whether they would be the end-user of the product, and if not, who would it be?

Acquisition Strategy

Ask them how they would go about finding solutions in your problem space.

Monetization Strategy

Probe on willingness to pay and comps.

Is the Solution a Vitamin or Pain Killer?

  • Validation depends on what stage you are on:
  • Early-stage
    1. If this solution were available tomorrow, where would it sit in the list of your team's priorities to implement?
  • MVP release
    1. Are they willing to sign up for an early pilot?
December 5, 2015
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Sachin Rekhi
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Sachin Rekhi

The Hunt for Product/Market Fit

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The Summary

Bring discipline to the P/MF hunt

Define your P/MF hypotheses

  • Dimensions: target audience, problem you're solving, value propositions, strategic differentiation, competition, acquisition strategy, monetization strategy, KPIs
  • Innovate on a few dimensions, not all. Use best practices for the rest

Validate each uncertain P/MF hypothesis

  • Pre-product: customer validation interviews
  • Post-product: customer metrics

Iterate based on what you've learned

  • Increase precision or change hypothesis
  • Fast iteration requires clear understanding of who owns the decision organizationally

Pivot on a single hypothesis

  • Something not working doesn't mean everything is not working
September 16, 2019
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Peter Lauten, David Ulevitch
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a16z

Product-User Fit Comes Before Product-Market Fit

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The Summary

PMF: Your product solves a problem, and there is a ready market for your product. PUF: You’ve built the right product for the right user.

Listen to power users

  • Power users are the biggest sign of PUF. Making the leap from PUF to PMF is about listening to these users to evolve your product to attract more users.
  • The conventional ways to observe PMF don’t tell us much when it comes to PUF. To understand PUF, understand why your power users are power users, their user behavior, and how to evolve the product to create more power users.

Pay particular attention to

1.    User retention 2.    Engagement depth that maps to the natural user behavior 3.    User testimony

The journey from PUF to PMF:

1.    Build something people want. 2.    Find out who else wants it. 3.    Get your product in their hands as fast as possible.

September 29, 2020
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Lenny Rachitsky
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Lenny's Newsletter

What it feels like when you've found product-market fit

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The Summary

The founders of 25 of the most iconic companies in the industry provide insight as to when and how they first knew they found product-market fit.

Biggest Takeaways

  • Market “pull” comes in many forms
    • An inflection in organic growth
    • Customers asking to pay for the product before you ask
    • Users flip from being excited about what you have to mad about what you don’t have
    • Customers complaining when your site goes down
    • People using the product even when it’s broken
  • About half of these companies found PMF immediately after launch, but half spent months or years iterating to get there:
    • Netflix: 18 months
    • Segment: 1.5 years
    • Airbnb: 2 years
    • PagerDuty: 2 years
    • Superhuman: 3 years
    • Amplitude: 4 years
  • The intensity of the pull is a factor of the fit (how good your product is at solving the user’s problem) AND initial market size (is it niche or broad).

Three Things Needed for True Product-Market Fit

  1. Make a product that people want
  2. Make a profit delivering this product to people at scale
  3. Find and keep these people, sustainably

Three Signs That You’ve Found Product-Market Fit

  1. Sudden and significant pull from the market
  2. Steady and compounding pull from the market
  3. Hitting a meaningful milestone that proves the idea is working
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James Currier
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NfX

The New Mindset for Product-Market Fit

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The Summary

Finding product-market fit:

  • Stage 1: Finding a product idea that users want — a concept that sticks.
  • Stage 2: Executing on the product — actually building it well.

Product-market fit is critical for success

  1. Achieving product-market fit means identifying customers who want your solution, in a market large enough to justify the business.
  2. The strongest product-market fit comes when users use the product routinely and find they can’t live without a product. Before you can find product-market fit, you need to first define your product’s promise.

Measure your product promise:

  1. Define the language, positioning, pricing, benefits, and value to your users
  2. Create ad campaigns to test different stories.
  3. Set up multiple landing pages and calls to action.
  4. Define your audience and start marketing.
  5. Analyze campaign success, benchmark data, and optimize until you get to a validated product promise.
November 26, 2018
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Mason Adair
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Medium

The Product / Market Fit Scorecard: Stop Wondering, Start Measuring

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The Summary

Objectively assess whether a product has reached market/product fit

Scaling is a choice, growth isn’t

  • What is the right time to invest in scaling measures?
  • If the opportunity presents itself
  • You won’t know exactly when product/market fit will happen
  • When it does, must know it’s happening to make well-time scaled investments

Timing is critical

  • If you achieve product/market fit you need to scale
  • But scaling prematurely will kill efficiency
  • Have realistic expectations of timing
  • While waiting actively measure indicators

What should you monitor?

  • 6 themes to indicate product/market fit
    • Acquisition
    • Revenue and Customers
    • Retention and Reinvestment
    • Referrals
    • Separation Anxiety
    • Intuition
  • Develop KPIs that monitor each of these themes

Product/market fit scorecard

  • Build a scorecard split into 6 themes
  • Split each theme into ‘objective’ and ‘subjective’ clusters
  • Use surveys to gauge ‘subjective’ cluster

Blending measurement and intuition

  • Scorecards create team discussion and information gathering
  • Create ‘caveat’ column for team
  • Tailor your scorecard to your context

Using scorecard in practice

  • Make sure team knows and discuss fit in context of OKRs
  • Involve stakeholders in scorecards
  • Set up a real-time dashboard to track your scorecard
  • Review fit status with stakeholders
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Good Problem-Solution Fit questions to ask your customer

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The Summary

A must-have product is more profitable than a nice-to-have product; tap into what your customer really needs

Types of “fits”

  • ‘Customer State fit’: make sure you understand your target group, their limitations, their available solutions
  • ‘Problem-Behavior fit’: after identifying most urgent problems, understand reasons for them; is this a problem worth solving?
  • ‘Communication-Channel fit’: understand what messaging will reach your customer

The Problem

  • Make a list of problems and guide customer through an elimination game to end up with the most important ones

The Behavior

  • What does the customer do about the problem currently?
  • Which solutions have been tried?
  • What are they paying for, and would they be willing to pay for something better?

The Solution:

  • State your vision of the solution
  • Identify price range for solution

After asking these questions:

  • Spot patterns in the problems experienced